Legislative Update

Friday, March 24, 2017
March 24, 2017 Legislative Update

Senate Unveils Tax Package

SB: 325 Billion Dollar Middle Class Tax Cut was filed by the Finance chairs, Sens. Jerry Tillman (R-Randolph), Andrew Brock (R-Davie), and Tommy Tucker (R-Union) on Tuesday.  The bill, which also has the support of 17 Republican co-sponsors, is divided into three parts: personal income tax changes, business tax changes, and market-based sourcing.

If passed, effective January 1, 2018, SB 325 would:

  • Reduce the personal income tax rate from 5.499% to 5.35%
  • Increase the standard deduction to $20,000 (currently $17,500) if married, filing jointly; $15,000 (currently $14,000) for head of household; $10,000 (currently $8,750) for single; and $10,000 (currently $8,750) if married, filing separately.
  • Expands the child deduction for people eligible for the federal child tax credit. Deduction ranges from $0 to $2,500.
  • Reduces the income tax rate for C Corporations from 3% to 2.75% beginning 2018, and to 2.5% in 2019.
  • Adopts market-based sourcing for multistate income tax apportionment.
  • Creates a new general statute on market based sourcing for banks

Senate Introduces Ban on Electronic Devices While Driving

Sens. Jeff Tarte (R-Mecklenburg), Michael Lee (R-New Hanover), and Deanna Ballard (R-Watauga) filed SB 364: Brian Garlock Act on Thursday. The legislation would outlaw the use of a cell phone or electronic device while driving, unless it is done through a hands-free device. The crime would be punishable as class 2 misdemeanor and a $200 fine. The bill is named after a Charlotte teenager who passed away in a car wreck while using his cell phone in 2008.

Cooper’s Veto Overridden

The General Assembly overrode Gov. Cooper’s veto of  HB 100: Restore Partisan Elections/ Sup. & Dist. Court  this week, which will return partisan elections to district and superior court races. The House voted to override Gov. Cooper’s veto on Wednesday by a vote of 74-44, and the Senate followed suit on Thursday by a vote of 32-15. Superior and district court elections have been non-partisan since 1996 and 2001, respectively.

Comprehensive Regulatory Reform Moves Forward

The House Regulatory Reform Committee met on Wednesday to introduce a proposed committee substitute to SB 131: Regulatory Reform Act of 2016-17. The Senate version passed its chamber by a vote of 38 to 11 last week. The legislation is a revival of a proposed regulatory reform bill that passed the House and Senate last session. However, the two chambers failed to reach a compromise between their deregulation bills before the end of the short session. The bill eliminates or consolidates various reporting and permitting requirements in various industries such agriculture, environmental and natural resources, and state and local government.

Key differences in the House regulatory reform bill:

  • Repeals a provision that encourages local boards of education to administer additional testing
  • Removes certain motor vehicles emissions inspections
  • Eliminates part of the coastal area management act
  • Exempts landscaping material from storm water management requirements
  • Removes the licensing requirement from the practice of horseshoeing
  • Modify stream mitigation requirements for intermittent streams
  • Instruct DEQ to study riparian buffer requirements for intermittent streams
  • Amend private drinking water well permitting requirements
  • Removes the print requirement for the state agency public records. Public records requirement can be satisfied by publishing online

Several committee members raised concerns about a new provision in the House version that would amend the sediment criteria regarding sand in the cape shoal. Regulatory reform, which is reducing government regulations on businesses, individuals, and local governments, has been an ongoing topic at the legislature in previous years. 

Wind Energy Moratorium

House and Senate leaders filed companion bills on Thursday that would place a temporary moratorium on permits for the creation and construction of wind energy facilities, commonly known as wind farms. HB 465/SB331: Military Operations Protection Act of 2017 would also direct the General Assembly to study the impact of wind energy facilities on military operations. Reps. John Bell (R-Wayne), Jimmy Dixon (R-Duplin), and George Cleveland (R-Onslow) sponsored the bill in the House, and Sens. Harry Brown (R-Onslow), Norman Sanderson (R-Pamlico), and Louis Pate (R-Wayne) sponsored its companion in the Senate.

 

 

Posted by: Kerri A. Burke, McGuireWoods Consulting LLC @ 12:00:00 am  Comments (0)
Monday, March 20, 2017
March 20, 2017 Legislative Update

The realities of a Republican led legislature and Democratic Governor became clearer this week as Gov. Roy Cooper addressed the legislature with his state-of-the-state speech and vetoed a bill for the first time. The legislature stayed busy this week as bill filing deadlines are quickly approaching. Bills concerning bees, basketball, and body piercing caught the attention of many, as well as a more traditional legislative topic – tax reform

Appointments and Confirmations

While the state awaits a judgment from the Superior Court, the Senate moved forward this week in confirming the Governor’s cabinet picks. This week, two of Gov. Cooper’s Secretaries received confirmation from the Senate. Erik Hooks was confirmed to serve as Secretary of the Department of Public Safety and Jim Trogdon was confirmed as the Secretary of the Department of Transportation. Additionally, Senate committees issued subpoenas for acting Secretaries Machelle Sanders, Department of Administration, and Tony Copeland, Department of Commerce, to appear before their respective confirmation committees.

House & Senate Tackle Tax Reform

This week, both the House and Senate released their tax proposals and the Senate passed a bill that proposed to constitutionally cap the personal income tax rate.

HB 356: Tax Reduction Act 2017 would:

  • Increase the standard deduction for personal income taxes. The standard deduction would be raised from $17,500 to $18,500 for married couples filing jointly, with similar increases for other tax status categories. The legislature increased the standard deduction last year in a continued effort to reduce the tax burden. 
  • Exempt mill machinery from retail sales and use taxes.
  • Simplify franchise tax calculation by eliminating a current requirement that a corporation determine its franchise tax base by calculating the appraised value of its real and tangible property and its total actual investment in tangible property.

HB 356, which is sponsored by Republican Reps. John Szoka (Cumberland), Jason Saine (Lincoln), Bill Brawley (Mecklenburg) and Susan Martin (Wilson) has been referred to the House Committee on Finance.

Though the Senate has not filed a bill yet, they have released the following proposals:

  • Reducing personal and corporate income tax rates to 5.35% and 2.75% respectively.
  • Increasing the standard deduction from $17,500 to $20,000 for a married couple filing jointly, with similar increases for other tax categories.
  • Increasing the current tax credit for families with children that earn less than $120,000 annually.
  • Increasing the amount of mortgage interest and property taxes that can be deducted from $20,000 to $22,000.
  • Switching to market based sourcing for tax calculation, which relies on income received by customers in the state instead of employment and capital investments.

Senate Finance Chairman Tommy Tucker (R-Union) believes the Senate plan would save businesses and individual taxpayers $1 billion in its first year, while House Finance Chairman Jason Saine (R-Lincoln) reports that the House bill would save businesses $135.8 million per year, while individual tax payers would save $64.5 million in the 2017-28 fiscal year and $124 million the following year.

Additionally, by a 36-13 vote, the Senate passed SB 75: Const. Amd. – Max Income Tax Rate of 5.5% on Tuesday. Sponsored by Sens. Tommy Tucker (R-Union), Andrew Brock (R-Davie) and Jerry Tillman (R-Randolph), SB 75 would constitutionally cap state income tax rate at 5.5%. The bill has now been sent to the House Committee on Finance. 

Governor Cooper Vetoes Partisan Court Bill

Gov. Cooper issued his first veto yesterday afternoon, objecting to HB 100: Restore Partisan Elections/ Sup. & Dist. Court, which would have made elections for district and superior court seats partisan. In his message, Gov. Cooper cites his concerns that making the courts more partisan takes away from the issues heard in the court and that voters should elect judges based upon experience and not party, and cites concerns about unaffiliated candidate having a difficult path getting on the ballot. Overriding a veto requires the approval of three-fifths of both chambers. With 74 seats in the House and 35 in the Senate, the GOP could override the Governor’s veto if they choose to.

HB 2 & Basketball

Following the fallout of HB 2, the “bathroom bill,” the National Collegiate Athletic Association (NCAA) and Atlantic Coast Conference (ACC) moved championship tournaments and other events from NC last year citing concerns about inclusion and civil-rights protections.

This week, Republican Reps. Mark Brody (Union), Chris Millis (Pender), Larry Yarborough (Person) and Beverly Boswell (Dare), called the NCAA and ACC’s tax exempt status into question with HB 328: Athletic Associations Accountability Act. The bill would require the Speaker of the House and President Pro Tempore of the Senate to file a tax-exempt organization complaint with the Internal Revenue Service against both the NCAA and ACC. Primary bill sponsor Rep. Brody argues that the organizations have lobbied against HB 2 and as a result are not eligible for tax-exempt status. The bill has been referred to the House Committee on Judiciary.

 

 

Posted by: Kerri A. Burke, McGuireWoods Consulting LLC @ 12:00:00 am  Comments (0)
Thursday, March 9, 2017
March 9, 2017 Legislative Update

Joint House and Senate Appropriations Subcommittees continue to review the Governor’s recommended appropriations. A number of bills have been heard in committee this week related to reshaping the state’s judiciary, regulating fantasy sports, and drone use around prisons and jails.

Ban the Box
Reps. Garland Pierce (D-Scotland), Rodney Moore (D-Mecklenburg), Cecil Brockman (D-Guilford), and Charles Graham (D-Robeson) filed legislation this week that would prohibit employers from asking about an applicant’s criminal record until an offer for employment has been extended. The bill includes exceptions for positions that are required by law to ask applicants about their criminal history. Proponents of HB 233: Ban the box say the legislation will reduce recidivism and improve economic opportunity.

Confirmations
Arguments before the three judge panel that will decide the constitutionality of Senate confirmation hearings began this week. However, this did not deter the Senate from continuing to hold hearings and issue subpoenas for Gov. Cooper’s cabinet appointments. Senate committees issued subpoenas Wednesday for Jim Trogdon, Secretary of Transportation and Erik Hooks, Secretary for Justice and Public Safety. A subpoena was issued Thursday for Susi Hamilton, Secretary of the Department of Natural and Cultural Resources. Larry Hall, Secretary of Military and Veteran Affairs, was confirmed this week. He was Cooper’s first appointee confirmed by the Senate.

Courts
Significant legislation has moved through the General Assembly that would impact the state’s court system.

HB 100: Restore Partisan Elections/ Sup. & District Court has been passed by the House and Senate and has been sent to Gov. Cooper for his approval. The bill, sponsored by Reps. Justin Burr (R-Stanly), Jason Saine (R-Lincoln), Dana Bumgardner (R-Gaston), Cody Henson (R-Transylvania), would return Superior and District Court races to partisan elections. Superior and District Court elections have been nonpartisan since 1996 and 2001 respectively.

Reps. Justin Burr (R-Stanly), David Lewis (R-Harnett), and Sarah Stevens (R-Surry) have sponsored legislation that would gradually reduce the size of the North Carolina Court of Appeals from 15 to 12 Judges. Opponents of the legislation say that reducing the size of the court would strain the court. Proponents say the court grew in size because of political appointees. HB 239: Reduce Court of Appeals Judges passed its second reading 71-42 and its third reading by a voice vote.

HB 240: GA Appoint for District Court Vacancies passed its second reading 66-47 and its third reading by a voice vote Thursday. The bill, sponsored by Reps. Justin Burr (R-Stanly), Kyle Hall (R-Stokes), and Dana Bum Gardner (R-Gaston) would require the General Assembly to appoint judges to district court vacancies. If the General Assembly is not in session when a seat becomes vacant, then the Speaker of the House and President Pro-Tem of the Senate may leave the seat vacant until the legislature reconvenes. Currently, the Governor fills District Court vacancies.

Drones over Jails
Reps. Allen McNeill (R-Randolph), John Torbett (R-Gaston), and John Faircloth (R-Guilford) have sponsored legislation that would prohibit drone use within 500 horizontal or 250 vertical feet of a state, federal or local detention center. HB 128: Prohibit Drone Use over Prison/Jail is in response to incidents across the country where contraband has been flown into jails and prisons by a drone. An individual would be charged with a class H felony for transporting a weapon into a detention facility, and a class I felony for transporting illicit materials. Other individuals would be charged with a class 1 misdemeanor.

Economic Terrorism
Legislation sponsored by Reps. John Torbett (R-Gaston), John Blust (R-Guilford), and Justin Burr (R-Stanly) would create criminal offenses for what proponents call “economic terrorism.” The bill states that an individual is guilty of the crime if he or she obstructs traffic, damages property, or disrupts business that results in damages or losses of more than $1,000 for a business or individual. If found guilty, an individual would convicted of a class H felony. Opponents of the legislation say this legislation is a violation of First Amendment rights. Proponents say the bill protects citizens and business owners from riots and violent protestors.

Fantasy Sports Regulation
A bipartisan group of House members filed a bill this week to regulate fantasy sports gaming in North Carolina. Sponsored by Reps. Jason Saine (R-Lincoln), Jon Hardister (R-Guilford), Ed Hanes (D-Forsyth), and Duane Hall (D-Wake), HB 279: Fantasy Sports Regulation would require the operator of a fantasy sports company to register with the Secretary of State, and pay initial registration and renewal fees. The initial registration fee would be 10 percent of the operator’s gross revenue from the previous year, but cannot exceed $10,000. The renewal fee would be 10 percent or $5,000 of the previous year’s net revenue. Renewal would be required every five years.

Renewable Energy
Reps. Jimmy Dixon (R-Duplin) and John Bell (R-Wayne) filed HB 267: Utilities/Amend REPS Requirements this week. The bill would reduce the percentage of renewable energy required in energy portfolios of utility providers. Under existing law, utility providers are required to have 6 percent of sales in their portfolios to come from renewable energy sources. The rate is scheduled to increase to 10 percent in 2018 and 12.5 percent in 2021. This legislation would permanently cap the rate at 8 percent. The bill also allows utility providers to meet up to 40 percent of their renewable energy requirements through savings from energy efficiency practices. Bill sponsors believe they will receive backlash from supporters of renewable energy.

Protection for Ex-Government Officials
Sens. Brent Jackson (R-Sampson) and Dan Bishop (R-Mecklenburg) have sponsored legislation that would provide security for a former Governor for one year after the end of his or her term. SB 229: Protection for Former Government Official would provide one member of the state highway patrol on the occasional basis at the request of the former Governor. However, the expense would be paid by the office of the current Governor.

Teacher Bonus Expansion
Sens. Trudy Wade (R-Guilford) and Kathy Harrington (R-Gaston) sponsored SB 169: Teaching Excellence Bonus Expansion. The bill is in response to certain third-grade teachers that did not receive their scheduled bonus in the previous year. Under legislation passed last session, third-grade teachers who met achievement requirements would receive a $3,500 bonus. However, many teachers that met the achievement requirements were moved to other positions within their schools, which resulted in a loss of the bonus.

 

Posted by: Kerri A. Burke, McGuireWoods Consulting LLC @ 12:00:00 am  Comments (0)
Thursday, March 2, 2017
March 2, 2017 Legislative Update

Governor Cooper’s Budget

On Wednesday, Governor Roy Cooper introduced his proposed budget for the 2017-18 fiscal year – “Common Ground Solutions for North Carolina.” Outlining his priorities as the first-year Governor, the budget includes raising teacher and state employee pay as well as expanding Medicaid. Additionally, the budget proposes a 5 percent increase in government spending by $1.1 billion and adding more than $300 million to the state’s “rainy day” fund.

The House and Senate are currently in the early phases of forming the biennial budget as appropriations subcommittees receive informational presentations and outline their priorities. This year, the official budget bill will originate in the Senate. With a Republican controlled legislature, the Governor faces an uphill battle in achieving most of his legislative agenda, including his proposed budget. Here is a peak at the Governor’s education, health and economic priorities:

Education

  • Increasing teacher Pay: The Governor proposed increasing teacher salaries by more than 5 percent in both the 2017-18 and 2018-19 fiscal year while providing classroom teachers with an annual stipend to assist with out-of-pocket expenses. Making these investments in education would help bring North Carolina to the national average for teacher pay in five years. The Governor also propped a 6.5 percent salary increase for principals and assistant principals.
  • Investing in Early Childhood Education: By doubling the percentage of 4 year olds enrolled in prekindergarten programs, and increasing the funding for the state’s Smart Start Program, the Governor’s budget prioritizes investing in education at the earliest level. The budget proposes funding 4,700 additional pre-K slots for at-risk 5-year-olds and increasing Smart Start funding by $15 million.
  • Improving Public School Outcomes: Public K-12 education is a high priority for Governor Cooper. His budget proposes investments in classroom support, digital learning and professional development opportunities for educators.
  • Ensuring a Workforce Pipeline: By investing more than $18 million in community college programs and a proposed scholarship program, the Governor hopes to bridge the skills gap between the state’s workforce and industry needs.
  • Maintaining Premier Public Higher Education: The Governor recommends making investments in data systems, scholarships, faculty and the state’s public historically black colleges to continue the state’s legacy as a top state for public higher education.

Health Care

  • Cost-Neutral Medicaid Expansion: Medicaid expansion is a high priority to the Democratic Party and to the Governor. In his budget, Gov. Cooper proposes covering an additional 624,000 individuals with Federal Medicaid dollars.
  • Combating the Opioid Epidemic: The national opioid crisis has not passed over North Carolina. A 2016 report found four North Carolina towns in the top 20 nationally for opioid abuse. Gov. Cooper proposes combating the epidemic by investing $12 million in mental health funds for community-based services and enhancing local law enforcement efforts against opioid abuse.

Economic Investments

  • Emphasis on Fiscal Responsibility: Cooper emphasized the need for bipartisanship in the state budget, including a focus on fiscal responsibility by not raising taxes, restoring the state’s Child and Dependent Care tax credit, a $300 million transfer to the Savings Reserve Account and ensuring that nonrecurring funds are not spent on recurring needs.
  • State Employee Pay Raises: The Governor’s budget recommends making the largest increase in state employee pay since the recession by implementing a recurring compensation increase of 2 percent and $500 one-time bonuses for all state employees.
  • Local Solutions to Economic Growth: To grow the state’s economy, Gov. Cooper proposes investing in local infrastructure. His budget proposes investing $30 million to develop state-owned sites to attract economic development projects in Tier 1 and 2 counties, providing $2 million to increase broadband access, developing safe and affordable low income housing across the state and investing an additional $5 million to match local government efforts to revitalize downtown communities.
  • Business Recruitment Efforts: The Governor proposes a number of efforts to recruit business to the state including restoring the film tax credit, investing $30 million to support efforts to attract major manufacturing employers and investing $3 million to advertise the state’s tourism and agriculture attractions.
  • Investments in Technology, Infrastructure and Transportation to modernize North Carolina: The Governor makes several proposals to modernize the state and keep up with economic demands including increasing Strategic Transportation Improvement funding by $150 million, taking out a $351 million bond package to renovate state government and university system buildings and replacing the state’s accounting and business systems through a $40 million investment.

 

Posted by: Kerri A. Burke, McGuireWoods Consulting LLC @ 12:00:00 am  Comments (0)
Thursday, February 23, 2017
February 23, 2017 Legislative Update

New Bipartisan HB2 Repeal Proposal Introduced

The first bipartisan bill dealing with HB2 commonly referred to as the “bathroom bill” was unveiled late Wednesday afternoon. Four House members, Rep. Chuck McGrady (R-Hendersonville), Rep. Ted Davis (R-Wilmington), Rep. Ken Goodman (D-Rockingham), and Rep. Marvin Lucas (D-Cumberland) filed House Bill 186 which will repeal HB2 while prohibiting cities and counties from regulating bathroom access in private facilities. Under the proposal, towns and cities could regulate bathroom access in owned or operated facilities. In addition, any local nondiscrimination ordinance could only take effect 90 days after local approval and voter referendum petitions are provided. The bill also includes a statewide nondiscrimination law that would ban discrimination on the basis of “race, sex, national origin, citizenship, religion, age, veteran status, genetic information, pregnancy, handicap or disability.”

As of Thursday morning, 11 additional sponsors signed onto the bill, including Rep. John Bradford (R-Mecklenburg). Upon filing, Rep. McGrady at a news conference stated, “This is not a take-it-or-leave-it bill. This is the best starting point we’ve had up until now…”

Governor Cooper & General Assembly on Teacher Pay Raises

Gov. Cooper announced his plan to raise teacher pay at a Charlotte elementary school Monday. Cooper stated that his budget will call for an average 10 percent raise in teacher pay over the next two years. The proposed pay increase is expected to cost $813 million over the biennium, which Cooper says can be done without a tax increase. Instead, he has called for a halt in corporate tax cuts. Cooper has also proposed a stipend of $150 to every teacher in order to cover the cost of school supplies. Teachers received an average raise of 4.7 percent in the previous year, which brought their average salary to around $50,000. Sen. Berger (R-Rockingham) has stated that he would like to increase the average teacher pay to $55,000 over the biennium.

UNC Board of Governors Bill Sent to the Governor

The Senate approved House Bill 39: Amend Appointments/UNC Board of Governors by a vote of 38-7 Tuesday and has been sent to Gov. Cooper for his approval. The bill was approved by the House earlier this month by a vote of 108-4. The legislation, sponsored by Reps. David Lewis (R-Harnett), John Fraley (R-Iredell), Jonathan Jordan (R-Ashe), and Darren Jackson (D-Wake), would decrease the number of seats on the Board of Governors from 32 to 24. Governor Cooper has not indicated whether or not he will support the bill. HB 39 is the first piece of legislation to pass through both chambers this session.

House Passes Partisan Elections Proposal

The House passed a measure making elections for District Court and Superior Court judges with a vote of 65-51.  House Bill 100 would require District and Superior Court judicial candidates to go through a party primary, and general election ballots would include party affiliations for the candidates. For those candidates registered as unaffiliated, they would go through a petition process to include their names on the ballot. This proposed change comes from Superior Court elections being switched from partisan to nonpartisan in 1996 and District Court in 2001. The bill now goes to the Senate for consideration.

Proposal to Allow Electronic Filings for Corporations

Senator Tarte (R-Mecklenburg) has introduced Senate Bill 114-Annual Report Modernization that will permit annual corporate reports to be emailed, instead of paper filed with the Secretary of State. The bill would expand e-filings for corporate information, registered agent data, principal office details and particulars about corporate officers, members, and managers. Additionally, the bill will require nonprofits to e-file “accountability matters.”

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